SustainabilityConnect Newsletter February 2024

EBA Proposes Guidelines for Banks on ESG and Climate Transition Risk Management.

The European Banking Authority (EBA) has introduced proposed guidelines to empower banks in managing environmental, social, and governance (ESG) risks amid the transition to a climate-neutral economy. These guidelines, part of the EBA's sustainable finance roadmap, stress the integration of ESG considerations into banks' risk management frameworks.

Central to the proposed guidelines is the requirement for banks to conduct regular assessments of ESG risk materiality. This involves employing diverse data-driven approaches to identify risks across various risk categories such as credit, market, operational, and reputational risks. Additionally, banks are tasked with developing transition plans to address climate-related risks and align with regulatory objectives.

The guidelines aim to address observed deficiencies in incorporating ESG risks into business strategies and risk management frameworks. By enhancing banks' resilience, they aim to facilitate the EU's transition to a more sustainable economy.

Updapt Views: The proposed guidelines bolster banks' risk management by integrating ESG factors, enhancing their ability to identify and address environmental and social risks. By developing transition plans, banks can adapt to regulatory changes and market shifts, ensuring resilience in the face of a transitioning economy.

Canada Implements Regulations for 100% Zero Emission Vehicle Sales by 2035.

Canada has introduced a comprehensive regulation pertaining to the availability of electric vehicles, stipulating annual escalations in the percentage of new zero emissions light duty vehicles sold, encompassing passenger cars, SUVs, and light trucks, with the ultimate objective of achieving 100% zero emissions vehicle (ZEV) sales by 2035.

Initially introduced in draft form, subsequent to the publication earlier that year of the government's 2030 Emissions Reduction Plan, delineating its roadmap to attain interim climate objectives of reducing GHG emissions by 40% - 45% by 2030, this regulation marks a significant milestone. The strategy outlined plans to institute ZEV sales mandates for light vehicles, in tandem with other initiatives aimed at electrifying transportation, such as funding allocations for charging infrastructure and EV incentives.

The impetus behind these regulations is to address a primary contributor to emissions in Canada, with the transportation sector responsible for approximately 25% of the nation's GHG footprint, and light-duty vehicles constituting roughly half of the sector's emissions.

Commencing in 2026, the new standard mandates that a minimum of 20% of new vehicle sales by auto manufacturers and importers must consist of ZEVs, escalating to 60% by 2030 and culminating in a 100% requirement by 2035. Government data reveals that battery electric and plug-in hybrid sales collectively represented just under 8% of new vehicle registrations in the initial half of the year.

This regulation delineates ZEVs as encompassing battery-electric vehicles, hydrogen-powered fuel cell vehicles, and plug-in hybrid vehicles meeting specified criteria for electric-only range. According to an official government statement heralding the finalization of the new standard, its objective is to enhance the accessibility of ZEVs for consumers, while concurrently supporting the Canadian auto industry's battery and automotive supply chain.

The government underscores that this standard is congruent with emerging regulations across North America, notably mirroring the mandate announced last year in California, which mandates that all new car, pickup truck, and SUV sales in the state must be zero emissions vehicles by 2035. This precedent has been followed by the implementation of analogous standards by 10 other states.

Updapt Views: Adopting Canada's regulation for 100% Zero Emission Vehicle Sales by 2035 positions companies as leaders in sustainable practices, fostering a positive corporate image. Compliance drives innovation in green technology, attracting environmentally conscious consumers. Moreover, anticipating future regulations ensures long-term viability, aligning businesses with global sustainability trends.

New Legislation in Australia Requires Climate Reporting from Companies.

Australia is proposing new legislation mandating climate-related reporting for large and medium-sized companies. This legislation aims to enhance transparency and accountability regarding climate risks and opportunities, as well as greenhouse gas emissions throughout the value chain.

The proposed law builds upon consultation efforts and aligns with international sustainability standards. It mandates reporting on material climate-related risks, emissions metrics, and governance processes. Initially targeting large companies, the legislation will gradually expand to include medium and smaller entities over the coming years.

The legislation would apply to all public companies and large proprietary companies required to provide audited annual financial reports to the Australian Securities and Investments Commission (ASIC) that meet specific size thresholds, starting with companies with over 500 employees, revenues over $500 million or assets over $1 billion, as well as asset owners with more than $5 billion in assets, which would begin reporting for fiscal years starting from July 1, 2024. Medium-sized companies (250+ employees, $200 million+ revenue, $500 million assets) would be required to begin reporting for years beginning from July 2026, while smaller companies (100+ employees, $50 million+ revenue, $25 million+ assets) would begin the following year.

Companies will be required to report on Scope 1, 2, and 3 emissions, with a phased approach for Scope 3 reporting. Assurance requirements similar to financial reporting will be introduced, ensuring the credibility of climate-related disclosures. The legislation aims to foster early adoption and capacity building for effective climate risk reporting.

Updapt Views:Mandatory climate reporting empowers companies strategically by providing data-driven insights into emissions and environmental impacts. This informs sustainable decision-making, enhancing resilience and competitive advantage.

US Government Pledges $104 Million for Net-Zero Energy Projects Across Federal Facilities.

The US government has committed $104 million to fund net-zero energy projects across 31 federal facilities as part of the Assisting Federal Facilities with Energy Conservation Technologies (AFFECT) program. This allocation, drawn from a $250 million fund initiated last year, aims to propel the nation toward achieving net-zero emissions by 2050. With 300,000 federal buildings in its portfolio, the government recognizes the urgency of enhancing energy efficiency to combat climate change

Initiatives encompass rooftop solar installations, heat pump systems, and other measures to reduce reliance on conventional fuel sources. The anticipated benefits include a projected $29 million reduction in energy and water costs within the first year, coupled with a substantial decrease in greenhouse gas emissions. Collaborative efforts with the Defense Department will strengthen energy resilience at military installations across the USA.

These investments underscore a bipartisan commitment to sustainability and emission reduction, aligning with broader governmental objectives to mitigate climate change and enhance energy security.

Updapt Views: Investing in net-zero energy projects includes significant reductions in energy consumption and greenhouse gas emissions across federal facilities. These investments enhance national energy security by reducing reliance on fossil fuels and mitigating the impact of energy price fluctuations and it will contribute to job creation and economic growth through the expansion of the renewable energy industry and related sectors.

The UAE plans to launch the first sustainability accreditation framework 'EcoMark' for MSMEs.

The UAE has plans to develop a sustainability accreditation system tailored for small and medium-sized enterprises (SMEs). The EcoMark accreditation aims to bolster SMEs' competitiveness within the green economy by simplifying and standardizing sustainability regulations globally.

Based on ISO standards and digitally facilitated, EcoMark certification offers comprehensive resources to guide SMEs through the accreditation process, including document guidelines, a roadmap for advancing sustainability levels, and standardized application procedures. Oversight of the framework will be centralized in the UAE.

Highlighting the significance of SMEs in driving a transition to a low-carbon economy, emphasis was placed on the need for tailored support to unlock their potential, especially for underrepresented groups like women and youth.

The EcoMark initiative aligns with discussions held at COP's inaugural Trade Day in Dubai, reinforcing the UAE's commitment to multilateralism and inclusive global trade. The UAE aims to facilitate broader access to sustainable markets, advancing a vision of a more equitable global economy.

Updapt Views:The UAE government's plan to introduce the EcoMark green accreditation framework for MSMEs enhances the competitiveness of MSMEs within the global green economy by streamlining and standardizing sustainability regulations, reducing complexities associated with compliance. By recognizing the pivotal role of MSMEs, the initiative aims to unlock their potential, reduce time and resource constraints, and enable them to participate more effectively in the global trading system.

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